In what would be a landmark change in its lending criteria, the European Investment Bank is proposing to stop funding carbon-based energy by the end of 2020.
As it phases out support for fossil fuels, it plans to focus more intensively on the energy transition and on support for renewable energy sources, such as offshore wind, where it has played an important role.
The bank said it proposes to phase out support for energy projects reliant on oil and gas production, infrastructure primarily dedicated to natural gas, power generation or heat based on fossil fuels. These types of projects will not be presented for approval to the EIB Board beyond the end of 2020.
“While it fully understands the role fossil fuels will continue to play within EU energy systems for at least the coming decade, the bank provides higher additionality by focusing on the longer-term challenge and investment needs of the energy sector,” it said. “As a result, all the bank’s activities in the energy sector will be fully aligned with the Paris Agreement.”
In the consultation, the role of fossil fuels received a lot of attention. The vast majority of civil society organisations, including in the three petitions totalling more than 30,000 signatures, called on the EIB to stop financing fossil fuels. Almost no contribution advocated the bank supporting the upstream extraction and production of fossil fuels.
Conversely, other contributions, mainly from the fossil fuel industry, reminded the bank of the role that oil and gas infrastructure will continue to play, even in decarbonisation scenarios, thanks to the development of low-carbon fuels such as biogas or hydrogen. As several stakeholders emphasised, security of supply and competitiveness are other important objectives of energy policy. Together with technology neutrality, these arguments were brought up mainly by the gas and nuclear industry, while NGOs considered that security of supply should not be an excuse for continuing to support fossil fuels and risk locking in CO2 emissions.
“Although fossil fuels will remain the dominant fuel in primary energy consumption, at a global and EU level renewable energy sources have been established as an essential part of power production,” said the EIB.
“This trend is expected to continue with renewables becoming the world’s second largest source of power generation, accounting for a third of production by 2030. Renewable energy thus has the potential to reduce further the dependency of the EU and the world on fossil fuels and break the longstanding link between economic growth and carbon dioxide emissions. Investment in renewables also enhances security of energy supply.
“Continued prioritisation of renewables is therefore fully justified,” said the bank. “Over the medium-term the goal is that the cost of renewable energy sources will continue to fall and become increasingly financially competitive with fossil fuels. The bank will continue to focus on the economic justification of renewables to ensure that the projects it finances are viable in the long-term and do not become an unreasonable burden on future electricity consumers.”
The EIB conducted a public consultation on its energy lending policy from January to March 2019. As it noted, the global energy sector is set for profound change and the European Union is at the forefront of this transformation. It has adopted measures to deliver ambitious climate and energy targets for 2030 and a new energy rulebook called Clean Energy for all Europeans.
The public consultation solicited views and input from the public on how the bank can best support EU energy policy and long-term climate and energy targets. The EIB received 149 written contributions from organisations or individuals. Feedback and suggestions were rich and diverse. Three petitions were received, signed by more than 30,000 people in total.
The EIB board of directors will discuss the draft energy lending policy on 10 September 2019. Once adopted, the final version of the policy will be published on the EIB’s website.